2020 has been a whirlwind, but that doesn’t mean Q4, the holiday season, or Black Friday and Cyber Monday will cease to exist. As the holiday season grows nearer, children begin to look to the skies to get a glimpse of their favorite jolly man adorned in red, while eCommerce marketers tend to look in a similar direction for the impending rise in advertising costs. It probably comes with very little shock when I say that advertising costs continue to creep further and further north the closer we get to Q4 — especially Black Friday and Cyber Monday.
The Holiday Growth Will Only Continue
Online retailers know they must pull all the stops in order to win this lucrative time of year. And why shouldn’t they? Online shopping has seen tremendous growth over the past few years with no signs of slowing down. We saw $126.4 billion spent online in 2018, and Deloitte’s annual holiday forecasting predicted that sales would increase between 14% – 18% (that’s $144 billion – $149 billion for those keeping count) during the 2019 holiday season!
Of course, 2020 threw us for a loop with eCommerce spend in April and May surpassing November and December of last year!
It’s still very likely that Black Friday and Cyber Monday will take center stage as the most important time for online holiday shopping — with Cyber Monday seeing an enormous 19.3% increase to $7.9 billion in 2018 according to Adobe Analytics. One-third of shoppers report that holiday weekend purchases were driven by promotions. It’s no wonder that so many brands are vying for consumers’ attention online.
But with such fierce competition comes an unfortunate downside: bid prices can increase up to 140% during the holidays!
Bidding Wars and the Unavoidable Cost Spike
Most marketers are very aware of this — anyone who has looked at CPM and CPC costs during this time has had to swallow a proverbial lump of coal. In fact, this concern topped the list in a recent study conducted by Shopify with 80% saying rising ad-spend is a top pain-point for the holidays.
Everyone wants to get the best deal, but if everyone tries to buy at the same time, costs go up. Just how big of an increase could you expect? Alarmingly, CPCs and CPMs increased 90% and 21% year over year since Q2 2018 — for a marketer this feels more like a Halloween fueled nightmare than a Holiday miracle!
There are some trends you can watch out for to help you effectively combat costs IE:
- The first two weeks of November and the last few days of December typically have the lowest CPMs, or
- Historically CPMs can rise 30%-40% from December 8th to December 25th)
Some predictions across the board forecast that eCommerce holiday spend and promotions in 2020 will extend beyond the normal Black Friday / Cyber Monday timeline. Meaning… we could potentially see an extended period with even higher costs as there’s more competition online than ever before.
The truth of the matter is that your advertising costs will always vary depending on a number of different factors. For example, buying ads on Facebook is more akin to an auction than a guaranteed bet, with several variables playing a part in shifting costs:
- Timing – The day, month, and even hour you show your ad
- Placement – Where you choose to showcase your ad
- Audience – Competition for similar audiences and the size
- Bidding Strategy – Whether you are bidding for low cost or bidding caps
Those are just some of the factors smart marketers must take into consideration when building their advertising strategies.
Advertising is all about the ROI. As such your goal as a marketer is to defend that ROI which is increasingly difficult with the rising costs — especially when trying to figure out what that extra somethin’ somethin’ is to allow you to inch ahead of the competition. We feel that pain — it’s something many of the brands speak to when we asked what their common pain points were.
The top three complaints we hear are:
- “Ads worked great, but my CPC is through the roof!”
- “Wasted a ton of money on advertising, got a bunch of clicks, but only a few sales.”
- “Paid a lot of money for clicks that seemed like fraud.”
So what can you do?
Don’t get us wrong, the standard channels still perform extremely well — you’d be hard-pressed to find a merchant who isn’t using the likes of Facebook or AdWords (and rightfully so!) But as the competition becomes ravenous, what else can a merchant do to creep ahead without spending an arm and a leg? Performance marketing may just be that additive step you can take to take back control on your ad-spend.
Simply put, performance marketing means, as a brand or retailer, you’re not paying unless a specific action is taken. This is very beneficial as a brand for a few reasons.
- It’s trackable and measurable. We’ll use a successful sale as our metric — we all know that’s usually the ultimate goal. In the case of performance marketing, you’re only paying when that sale is made. Instead of putting money upfront and not knowing if those ad dollars resulted in a sale, you can easily link that sale to the platform.
- It’s low risk. There isn’t nearly as much risk with performance marketing as traditional advertising has. You see the results in real-time, modify your budget, or even put stops in place to avoid overpaying.
- It allows you to extend your reach. With performance marketing, you reach a more substantial and diversified audience than with traditional advertising. It may seem obvious, but performance marketers don’t get paid unless you get paid. That means they’re going to work extra hard to make sure the campaigns are successful.
When looking at performance marketing, find a partner that aligns with your brand. This can have a few different meanings, whether that means affiliates with a similar audience, a platform that specializes in your particular goal (conversions/clicks/etc.), or one that gives you complete control over how you pay.
Especially when it comes to the holiday season this year, I have some parting thoughts as it pertains to your performance marketing strategies:
- Add performance marketing; don’t replace. There’s a reason traditional digital advertising is still growing: it works. Diversify your channels and reach, but do so in a cost-effective way with performance marketing.
- A performance marketing platform should span the entire sales funnel. A good performance marketing platform helps acquire new customers. A great one also helps keep them.
- Consider your LTV when deciding your CAC. A successful business model requires that your customer spends more than the cost it took to acquire them. Utilize what you know about your customers to help inform you in the planning stages.
Find a partner that aligns with your brand. This can have a few different meanings, whether that means affiliates with a similar audience, a platform that specializes in your particular goal (conversions/clicks/etc.), or one that gives you complete control over how you pay.
While there are certainly hundreds of helpful articles that will give you effective strategies to navigate and combat the extreme holiday spike, we recommend you ask yourself the “next step” question: what’s that extra thing I can do that will help push me ahead of the competition without breaking the bank? While there are a lot of options out there to help give you that extra push, we recommend something that eliminates CPCs and CPMs completely.
Whatever you choose, we hope you’re able to effectively fight those CPMs for what’s shaping up to be an unprecedented Q4 2020!
For those who are new to Klickly, we are an invite-only 100% commission-based advertising platform that allows eCommerce merchants to lock in their returns by choosing their own commission. Klickly, then, advertises your products across 25Million+ premium online destinations (like the open web, apps, games, etc) only charging when we help make a sale.